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Germany's Largest Firms Paid Less Corporate Tax In 2012

Monday, 29 July 2013   (0 Comments)
Posted by: Author: Ulrika Lomas
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Author: Ulrika Lomas

Last year, the thirty largest companies listed on the German stock market index, the DAX 30, paid a total of EUR24.2bn (USD32.16bn) in profit tax, marking only a slight increase compared to the previous year despite higher profits, due to an on-year decline in the actual rate of taxation.

Drawing on data compiled by Ernst and Young, Les Echos has revealed that although the total taxable profits of the DAX 30 giants rose by 7 percent, from EUR91.2bn in 2011 to EUR97.5bn in 2012, the total tax paid by the largest equities increased by just 2 percent over the same period. This is due to a recorded fall in the actual rate of corporate taxation in Germany, from 26.1 percent in 2011 to 24.8 percent last year.

In Germany, corporate income tax is currently levied at a rate of 15 percent. A solidarity surtax of 5.5 percent is also imposed on the corporate income tax rate, bringing the total corporate income tax burden to 15.825 percent. Furthermore, German municipalities levy a municipal trade tax, at rates varying between 7 percent and 18 percent, and averaging between 14 percent and 15 percent. This gives rise to a theoretical tax rate of between 29.8 percent and 30.8 percent.

The figures expose the fact that the actual amount of corporate tax paid by the largest DAX 30 corporations varies tremendously, as groups are able to benefit from the various tax credits, tax shelters, and fiscal optimization schemes available.

In 2012, the largest corporate tax contributor, Volkswagen, paid around EUR3.6bn in corporation tax to the German tax authorities. Last year, the car group benefited from an effective corporate tax rate of 14.2 percent, significantly lower than the theoretical tax rate of 29.5 percent, effectively halving the company's tax bill.

Despite the fall in the actual corporate tax rate paid by many large firms, Germany's largest equities are subject to rigorous tax controls every three to four years, with the administration ensuring strict compliance with transfer pricing rules and regulations governing the location of profits in low tax jurisdictions, according to Ernst and Young tax expert Ines Leffers. She insisted that there is little scope for groups to circumvent Germany's tax laws.



Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.

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